How do childcare costs vary around the world?

Over the last few years we have seen an increase in the number of clients interested in offering compensation for nursery fees to those employees going on assignments with infants. So, this year, as part of our new Education reports, we introduced a new product - Childcare costs. In this blog we look at the varying company policies regarding childcare, which countries have the most and least expensive nursery fees, as well as how childcare practices differ around the world.

Why should companies provide a childcare allowance?

Results from our Benefits for International Assignments Survey show that 19% of companies provide some form of assistance with childcare for children below mandatory school age in the host country. However, this does vary significantly by location, with just 7% of Asian organisations doing so compared to 32% of European organisations. All of those providing some childcare cover nursery fees, while only 9% cover other childcare providers such as nannies and childminders.

So why should companies provide assistance with childcare? Firstly, in the past it was much more commonplace to have a stay-at-home partner looking after the children whereas nowadays this is less often the case. This is partly due to an increase in single-parent families being sent on assignment but also due to a growing trend, revealed in our Managing Mobility Survey, of more accompanying partners working while abroad. Pressure groups such as the Permits Foundation are partly to thank for this. Due to their continuing efforts, more partners of expatriate staff are now able to obtain working visas and take jobs while on assignment. Some international companies are also promoting this trend by employing partners wherever feasible in the host location and offering other assistance such as careers advice. At the same time, the percentage of dual career households has increased as both the number of female assignees and female participation in labour markets in general have risen. This increase in the number of accompanying partners working abroad, alongside an increase in single-parent families, means that more assignees must now pay for childcare when on assignment.

Secondly, as our findings below show, childcare costs can place a significant financial burden on parents, which could deter employees from going on assignment. This would especially be the case for employees relocating from a country with relatively low or subsidised childcare costs to a country with high childcare costs, as this would be an added expense that they would have to shoulder. By providing assistance with childcare costs, companies can make their remuneration packages more appealing, enabling them to attract the best talent.

Nursery fees – which countries top our rankings?

Our results show that nursery fees vary significantly around the world. This is due to a number of factors including demand and supply, opening hours, and whether government subsidies are offered to offset the price.

The United States tops our rankings with an average annual fee of USD 35 431. Switzerland, the United Kingdom, Netherlands and Australia follow shortly behind. It is no real surprise that these countries have expensive nursery fees. All have a high GDP per capita and a culture where it is commonplace to have dual career households, creating high demand for nurseries from expatriates and locals alike. Nurseries in these countries also typically have long opening hours to cater to work demands, further pushing up prices. For example, in the United States it is typical for a nursery to be open 10 hours a day, 52 weeks a year, whereas in Thailand, for example, nurseries are only open on average six hours a day, 44 weeks a year.

Unlike the other countries in our top 10 rankings, Russia has expensive nursery fees not due to high demand but rather due to a lack of supply. In Russia there is not a culture of sending children below the age of two to nurseries. If both parents have to work a grandparent will normally step in to look after the child. Very few nurseries therefore accept infants. The few international nurseries that do are, as a result, very popular among those expatriates accustomed to sending their children to nursery at an earlier age and are therefore able to keep their prices high.

On the other end of the spectrum we found that Sweden has the cheapest nursery costs with an average annual fee of just USD 1 829. This is due to the fact that Sweden has very generous childcare subsidies. For example, in Stockholm, full-time care for a one year old is capped at 3% of family income, or a maximum of SEK 1 425 per month. This amount then decreases for every additional child. Several other Western European countries also offer generous childcare subsidies including Norway, Austria, Finland and France. In fact, in 2018, Berlin became the first German state to abolish fees for all municipal day care centres. A move intended to make the city more family-friendly and relieve the financial pressure placed on parents. Although subsidising childcare costs has its obvious benefits it can lead to a fall in supply as less investment is ploughed into the sector. Expatriates moving to locations where childcare costs are heavily subsidised should be aware of this as they may be faced with long waiting lists. For example, in Berlin where there is currently a shortage of around 2 500 nursery places, waiting times can be up to one year.

Nurseries vs childcare providers

Nurseries that meet the needs of expatriates are not always easy to find. Four such locations that have a surprising lack of suitable nurseries are Hong Kong, China, Turkey and South Korea. In Hong Kong this is due to the large prevalence of domestic helpers. Nannies are readily available and are typically cheaper than nurseries, meaning they are normally the first point of call for parents with young children. As a result, not many nurseries in Hong Kong accept infants. Nurseries that are open to children below the age of two usually have a policy whereby the child has to be accompanied by an adult, meaning that expatriates are forced to hire a nanny anyway. In China, Turkey and South Korea nurseries typically do not accept infants and often follow an academic calendar, so are not open throughout the year. Expatriates living in countries such as these, where suitable nurseries are not readily available, will have to rely on childcare providers to care for their children. Companies should be aware of this and be more flexible in their definition of childcare as a result, as currently only a small percentage cover the cost of childcare providers outside formal nurseries.

FIND OUT MORE

Nursery and childcare provider fees can be found within the Childcare section of ECA’s new Education reports. These are updated annually in April.